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New FLSA Opinion Letters – Calculating Overtime & Hours Worked & Highly Compensated Paralegals

Posted Tuesday, July 9, 2019 6:28 am

The U.S. Department of Labor's Wage and Hour Division (“WHD”) released three new opinion letters, addressing compliance issues under the Fair Labor Standards Act (“FLSA”).  One relates to the calculation of overtime pay for nondiscretionary bonuses paid on a quarterly and annual basis; the second discusses the application of the highly compensated employee exemption; and the third addresses rounding practices for calculating an employee’s hours worked.

An opinion letter is a written opinion by WHD on how a particular law applies to the specific facts presented by the person or entity requesting the letter.

Calculating Overtime Pay for Bonuses

FLSA2019-7 addresses two types of bonuses: (1) an annual bonus, which is 1% of the straight-time hourly rate for 2,080 hours (not tied to hours actually worked); and (2) a quarterly bonus of (a) 15% of the straight-time rate for each hour the employee earns a straight time rate, (b) 22.5% of the straight-time rate for each hour the employee earns a time-and-one-half rate, and (c) 18.75% of the straight-time rate for each hour the employee earns a double-time rate.

The letter concludes that the employer must, after paying the annual bonus, recalculate the regular rate for each workweek in the bonus period and pay the overtime compensation due on the annual bonus.  Because the employer can readily ascertain the proportionate amount of the annual bonus earned in each workweek, the employer must retrospectively include those exact proportionate amounts in the regular rate for each workweek.

With respect to the quarterly percentage bonus, the employer need not recalculate the regular rate for each workweek because the bonus already includes all overtime compensation due on the bonus.

Highly Compensated Exemption

FLSA2019-8 discusses FLSA’s highly compensated exemption.  An employee qualifies for the highly compensated exemption if:

  1. the employee’s “primary duty includes performing office or non-manual work”;
  2. the employee receives total annual compensation of at least $100,000;[1] and
  3. the employee “customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee.”

The letter focuses on the third prong, emphasizing that an employee only needs to perform one exempt duty “more than occasionally.”  An exempt duty is “more than occasional if it is performed normally and recurrently every workweek, but not if it is an isolated or one-time task.”

The paralegal employees at issue in the letter have responsibilities such as “keeping and maintaining corporate and official records, assisting the finance department with bank account matters, and budgeting.”  Because these duties are “directly related to management or general business operations,” the letter concludes the employees perform at least one of the duties of an exempt administrative employee.

The letter also concludes that the employees perform one or more of these exempt duties “customarily and regularly” because these duties are among the paralegals’ “major duties and responsibilities.”  The letter emphasizes, however, that only one of the duties must be of an executive, administrative, or professional character, and that one duty does not need to be the employees’ primary duty.

Rounding Practices for Hours Worked

The issue in FLSA2019-9 concerns a non-profit organization’s rounding practices to determine hours worked.  The letter notes that it has been WHD’s policy to “accept rounding to the nearest five minutes, one-tenth of an hour, one-quarter of an hour, or one-half hour as long as the rounding averages out so that the employees are compensated for all the time they actually work.”  Here, the organization utilizes payroll software that rounds to the nearest hundredth of an hour (.01), rounding up when the third decimal is .005 or greater and staying the same if the third decimal is less than .005.  According to the letter, because the practice is neutral on its face and appears to average out so that it fully pays employees for all of the time they actually work, the organization’s rounding method complies with FLSA.

Questions for the WHD?

Do you have a question for the WHD?  Employers can visit this webpage to learn how to request an opinion letter or determine whether existing agency guidance already addresses their questions.

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[1] As discussed in a previous news digest article, the “highly compensated employee” threshold will likely soon change.  The proposed rule increases the threshold from $100,000 to $147,414 per year.

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